NAAFI: Food Supply Contract (Hansard, 19 March 1997)

The Parliamentary Under-Secretary of State, Ministry of Defence (Earl Howe)
My Lords, the award of the food supply contract to the Booker Foodservice Group followed a year-long competition phase. The tenders submitted were subjected to thorough commercial and technical evaluation and the Booker bid was assessed as clearly offering the better overall value for money for the department. Savings as a result of the tendering process over the life of the contract are currently estimated to be of the order of £15 million.

§ Baroness Turner of Camden
My Lords. I thank the Minister for that response. Is he aware that the awarding of the contract to this company could result in the possible loss of 2,000 jobs of people formerly employed by NAAFI? Is this social cost taken into account by the Government when considering what the costs are to the taxpayer?

Earl Howe
My Lords, the job losses announced by NAAFI are clearly a matter for regret. But I would stress 899 that the majority of them are the result not of the loss of the food supply contract but of the restructuring programme that was recently announced by NAAFI's chief executive. That programme should be regarded as a vote of confidence in NAAFI's future and is aimed at ensuring the long-term health of the corporation and had already been planned before the decision on the food supply contract was announced. However, there is good news for some because Booker expects to create some 300 new jobs by virtue of winning the contract.

Earl Attlee
My Lords, is the noble Earl aware that NAAFI is not a perfect supplier? My own TA unit frequently receives supplies of beer that has very little shelf life remaining. Is the Minister aware of the great difficulties of drinking such large quantities of beer in a relatively short space of time?

Earl Howe
My Lords, I do not think my noble friend should have to put up with a glass of beer that is not to his satisfaction. He makes an important point. NAAFI knows that there is scope for improvement in the services it offers. It underlines the point that NAAFI will now focus on its traditional core activities; namely, its shops and clubs. It will do that in partnership with high street stores and leading breweries so as to maximise efficiency. The priority for NAAFI is to maintain the momentum of that programme, which has already got off to a very good start, and to make sure that it can provide high quality retail and leisure facilities for service personnel.

§ Lord Williams of Elvel
My Lords, as this may be the last point at which the noble Earl and I have exchanges from our respective Dispatch Boxes, perhaps I may, with the leave of the House, thank him very sincerely for the way he has conducted the defence portfolio in this House. He has been a model of courtesy and I am most grateful from my point of view. I also congratulate the Minister on not introducing the minimum wage. Previous Ministers have brought everything in; this one has been left out. Can he expand a little on the future of NAAFI? Having lost what I understand is a very important contract—an important element in NAAFI—does the Minister consider that NAAFI, even in spite of what he said about the retail activities, has a real future?

Earl Howe
My Lords, I am extremely grateful to the noble Lord for his generous remarks. I too have enjoyed our exchanges across the Dispatch Boxes over the past 18 months or so. The future importance of NAAFI to the services cannot be overstated. NAAFI now has a chief executive who is determined to drive the organisation forward, to modernise and to make sure that its services are consistent with what our Armed Forces wish to receive. I have every confidence in NAAFI's ability to do that and every confidence that the restructuring exercise that I mentioned will enable it to 900 invest to the degree necessary to ensure that the clubs in particular but also the retail outlets are upgraded to a satisfactory standard.

§ Lord Dean of Beswick
My Lords, while the business deal that has been explained today sounds very good, is the Minister aware that some of the people involved have a reputation for asset stripping in other companies? Can we have an undertaking that this exercise will not have that kind of ending? Is the Minister aware that some of the same people are now targeting the Co-op movement? Those of us who have been involved with the Co-op all our lives do not want anything to do with them. Can he give an undertaking that the Bank of England and the Ministries concerned will keep a close watch on the activities of these people as one of their companies has had to cease trading on the instructions of the Bank of England because it had acquired an artificial increase in its share prices?

Earl Howe
My Lords, the contract will be closely monitored as it proceeds. Booker is the market leader in food distribution. It has a well proven track record. It is setting up dedicated facilities to support the MoD contract which, as the noble Lord will be well aware, will be backed up by the considerable strength of the Booker plc organisation. My department considered all aspects of the food supply requirement both in this country and overseas during its evaluation of the tenders. We were absolutely satisfied that Booker's proposals were sound, realistic and achievable. I repeat that I am confident that we shall see a successful transition of the food supply contract when NAAFI's service comes to an end later this year.

§ Lord Palmer
My Lords, will the noble Earl tell the House how many other tenders they had other than Booker's for this particular contract?

Earl Howe
My Lords, tenders were initially invited from six companies, but in the end bids were received from only two; namely, NAAFI and the Booker Foodservice Group.

§ Baroness Turner of Camden
My Lords, in view of the fact that NAAFI is itself restructuring and no doubt endeavouring to modernise its activities, would it not have been better in the circumstances at least to have given the contract to NAAFI and to have retained the jobs rather than to put out the contract to an outside operation?

Earl Howe
My Lords, we made it clear when NAAFI gained the food supply contract initially in 1994 that that contract would be subject to a tendering exercise last year. We adhered to that. Having decided on that route, we had to make sure that the competition was fair and open. I, and no doubt many others, were disappointed that NAAFI did not manage to secure the contract. But clearly we have a good prospect, as I have said, in the shape of Booker to ensure that the contract is delivered successfully. As regards job losses, I stress again that jobs will be created by Booker. It is not 901 entirely a one-way story. But for those people who are losing their jobs steps are being taken to minimise the pain to ensure that resettlement services are available, advice and so on. I believe that the decision we have taken is in the long-term interests of our Armed Services.

§ The Countess of Mar
My Lords—

The Lord Privy Seal (Viscount Cranborne)
My Lords, with the greatest respect to the noble Countess, I think we should give perhaps five minutes to the next Question.